The Economic Calendar has three potentially important events this week:

• Personal Income and Outlays on Monday (consensus 0.6% income, 0.5% spending)
• ISM Manufacturing on Tuesday (consensus 51)
• The Employment Situation on Friday (consensus 100,000 jobs added, 4.5% unemployment)

Earnings season continues in full force.

Monday

• Verizon (VZ - Annual Report) - possible upside to sales

Tuesday

• Plantronics (PLT) - anyone’s guess, though our long position gives away our own guess

Wednesday

• Cognizant (CTSH) - one of these days the growth will hit a wall, but probably not this day
• Garmin (GRMN - Annual Report) - shouldn’t need a big surprise to move the stock from this level
• Itron (ITRI) - risk to estimates in both directions due to Actaris acquisition
• Sprint (S - Annual Report) - the worst may be over here
• Symantec (SYMC) - Based on MFE and VDSL should have a big quarter

Thursday

• Ansys (ANSS) - Dassault beat big, and we like Ansys better
• QLogic (QLGC) - too risky for our tastes
• Starbucks (SBUX) - probably no surprise, but risk probably to the downside when they are making this kind of move

Disclosure: Long PLT and ITRI

Disclosure: Author is long Starbucks (SBUX) at time of publication.

The Economic Calendar is relatively light this week. Potential market movers include:

• Wednesday’s Durable Goods report (consensus 2.2%)
• Friday’s advance report on Q1 GDP (consensus 1.8%)

Earnings are another story. We are in the peak part of earnings season this week. A few of the stocks we follow:

Monday

• Altera (ALTR) - valuation is rich but looks set up to beat on earnings.
• Texas Instruments (TXN - Annual Report) - March and June quarters have both had significant downward revisions. Will day of reckoning be forestalled?

Tuesday

• AU Optronics (AUO) - Forecasting losses, but panel business may have bottomed out.
• CDW Corporation (CDWC) - 14.6% sales growth doable given Berbee acquisition.
• CH Robinson (CHRW - Annual Report) - Could beat.
• CSG Systems (CSGS) - earnings should be a piece of cake. If private equity buyers don’t take them out they’ll do it themselves the slow way.
• Lexmark (LXK) - Estimates are doable but we’re always waiting for this company to trip up.
• ST Microelectronics (STM) - Doing the right thing. Hopefully will pay off.
• AT&T (T - Annual Report) - Estimates and stock both keep rising.

Wednesday

• Apple (AAPL) - Hunch: company will blow away earnings, issue horrible guidance and blame it on iPhone build.
• Arkansas Best (ABFS) - We’re staying away from truckers who own trucks.
• Corning (GLW - Annual Report) - current quarter ok, guidance at risk.
• LSI Logic (LSI) - May blame their poor guidance on Agere.
• Maxim (MXIM) - Company is out of gas but focus will be on whether they might sell out.
• Qualcomm (QCOM) - Nokia Nokia Blah Blah Nokia ad nauseam (excerpt from pending conference call transcript)
• Silicon Laboratories SLAB - Sold wireless just when biggest customer began to recover. What other surprises may be in store?
• UPS (UPS) - They shouldn’t have trouble beating the estimates (but that doesn’t mean they won’t).
• Xilinx (XLNX) - Altera with more risk to the earnings target.

Thursday

• Curtiss Wright (CW - Annual Report) - PPI data suggests they should beat big, but it suggested the same last quarter.
• KLA Tencor (KLAC) - Another place we’d rather not be right now.
• Microsoft (MSFT - Annual Report) - Vista is still not living up to expectations.
• MEMC Electronics (WFR) - Earnings surprises have been getting bigger each quarter. Now that we’ve put a semiconductor name on our Large Cap Watch List (Track at Marketocracy) it will probably stop just to spite us.
• YRC Worldwide (YRCW) - See Arkansas Best.
• Sandisk (SNDK - Annual Report) - Will take more than one quarter to clear the channel inventory.

Friday

• Dassault Systemes (DASTY) - We like Ansys (ANSS) better but don’t see why this name wouldn’t beat.
• Ceradyne (CRDN)  - Earnings could be anywhere and don’t really matter.

Enjoy!

Disclosure: William Trent has a long position in SMH.

With indications of a consumer spending slowdown building, hopes for real GDP growing at 2.5% must anticipate a fairly significant contribution from business spending (since the consumer accounts for roughly two thirds of the economy.) However, the latest poll of Chief Information Officers (CIOs) by CIO Magazine does not paint a particularly rosy picture. In fact, the only thread on which the bulls can cling is that CIO sentiment is frequently more of a lagging than a leading indicator of tech spending. As evidence, consider this quote from the poll findings:

In the December Poll, panelists project IT budgets will grow by 5.8% over the next 12 months, down from 6.5% in the September poll. In addition, CIOs report that IT budgets increased by an average of 5.8% over the last 12 months, up from 5.0% last quarter.

Hmm… the estimate for the next twelve months happens to be exactly what happened over the last 12 months? Definitely has the ring of a lagging indicator. But regardless, the results offer something of a glimpse into CIO plans.

Findings from the quarterly CIO Magazine Tech Poll(TM - Annual Report) show IT spending projections decreased in October-December with CIOs predicting IT spending increases of 5.8% over the next 12 months, down from 6.5% in the previous quarter. Poll results also show the majority of CIOs (63.6%) have no plans to invest in Office 2007 or Vista 2007 next year. Key focus categories of growth are Computer Hardware, Storage and Security.

So mixed news for Microsoft (MSFT - Annual Report) and a glimmer of hope for DELL. Since storage and security have recently been key spending areas anyway, it is hard to say whether calling them a focus area means improvement or not. As evidence, consider this quote from the poll findings:

In the December Poll, panelists project IT budgets will grow by 5.8% over the next 12 months, down from 6.5% in the September poll. In addition, CIOs report that IT budgets increased by an average of 5.8% over the last 12 months, up from 5.0% last quarter.

Hmm… the estimate for the next twelve months happens to be exactly what happened over the last 12 months? Definitely has the ring of a lagging indicator.

The CIO Magazine Tech Poll results are used to construct the CIO Magazine Tech Future Growth Index (TFGI), which projects IT activity over the next 12 months1. In December the TFGI is 2.3, down from 2.5 in September.

The problem is, even if considered as a contrary indicator, the stock market hasn’t priced much calamity into tech stocks of late.

William Trent currently has a short position in put options related to Office Depot (ODP).

Oracle’s application software company acquisition spree was about more than adding the revenue lines of multiple companies to create the illusion of growth. Ideally the companies, when integrated, will save customers the hassle of integrating them themselves. We wrote in June of Oracle’s attempts to build an end-to-end platform for telecommunications carriers.

According to Convergence TechPlanet, With recent acquisitions like HotSip (a telco infrastructure software company looking at IMS), Net4Call (maker of Parlay/OSA delivery components, which supports legacy telco networks) and Portal (billing and revenue management solutions for telcos and media), Oracle is cobbling together an end-to-end service delivery platform (SDP) offering for telcos.

Besides these telco-specific acquisitions, Oracle claims it has a comprehensive offering, with much of the middleware stack (e.g. E-business suite), analytics (e.g. Siebel and Peoplesoft) and backend database (e.g. Oracle 10g) in place.

But industry-specific platforms are one thing. Better still would be to integrate solutions for problems that all businesses face. And according to this week’s Information Week, Oracle is attempting just that:

Last year Oracle purchased three companies specializing in security…. Oracle plans to have its security technology working behind the scenes to ensure that users will have access only to data and applications in [Oracles integrated package called] Fusion that they’re authorized to get.

Integrating security into applications is, to some extent, the holy grail. As we noted when Microsoft launched its security suite, called Microsoft One:

Of course, the other way to protect Windows users from malicious threats would be to make the operating system more secure in the first place. It remains to be seen whether consumers will be willing to fork over extra money to Microsoft and create a conflict of interest for the company: do we improve Windows or sell more OneCare?

At least Oracle’s system is designed to work behind the scenes rather than as an add-on product that fixes bugs introduced by other Oracle applications. And if it works, the market will embrace it.

Back in May the market was abuzz with the news that Microsoft had released a consumer antivirus program that would compete with those offered by Symantec and McAfee.

The launch marks Microsoft’sbiggest formal push into the PC security market yet, and pits the world’s largest software firm directly against security-software makers like Symantec Corp. (SYMC) and McAfee (MFE)….

Microsoft’s launch followed months of testing of the product, which it says offers an “all-in-one, automatic and self-updating PC care service” to help users of its dominant Windows operating system protect their data and easily maintain their computers.

Used to power over 90% of the world’s computers, Windows is often the target of malicious attacks like viruses and worms.

As we said at the time, the other way to protect Windows users from malicious threats would be to make the operating system more secure in the first place. We also said that Microsoft needed to get Vista done right, rather than just get it done, for much the same reason.

Now we get a progress report:

Microsoft Patches Same Explorer Hole for 3rd Time - Microsoft Informer - Blog - CIO

Among the security patches released by Microsoft Tuesday is an Internet Explorer fix that is now being distributed for the third time, due to problems that weren’t fixed on the patch’s first or second releases, the company has admitted.Last month, eEye Digital Security warned users that Microsoft’s August security update, MS06-042, had in fact introduced a new critical security bug. Microsoft responded with a “hotfix” repairing the problem.

The two companies also engaged in a war of words over eEye’s disclosure of the seriousness of the problem introduced by MS06-042. While Microsoft described the problem as relatively minor, involving browser crashes, eEye discovered that the hole could be exploited to run malicious code. Microsoft called this disclosure “irresponsible” and removed eEye from the flaw credits.

That wasn’t the end of the story, however: the “hotfix” of 24 August failed to completely fix the problem, eEye discovered. This week’s second update fixes the problems missed by the first re-release, Microsoft said.

Symantec and McAfee have little to fear, it would seem.

We wrote not too long ago on the crazy contortions Fidelity National Information Systems went through as part of its merger with Certegy. We also noted that the firm was continuing to reorganize, further muddying the water for analysts trying to get a handle on how the company is performing. Now SmartMoney has an article that tells us it’s all for the best:

Getting Untangled | SmartMoney.com

Fed up with the discounted share price that Wall Street was awarding their big, intertwined mortgage title-insurance and financial data-processing businesses, executives at Fidelity National decided in April to jettison a third operation — a holding company that held stakes in both. They hoped that analysts and portfolio managers would then more easily understand the two operating units. Only a few months before, Fidelity had divided itself from one unit into three.

“A title-insurance analyst did not understand processing and the processing analyst really didn’t want to get on board because we are known as a title-insurance company,” explains William P. Foley II, the Jacksonville, Fla., company’s founder, chairman, chief executive and largest individual stockholder. “Then, when we formed the holding company, we probably confused people even more,” he added.

Of course, while the restructuring may simplify things over the long term, it prolongs the period of obfuscation. For a year after the reorganization, comparisons of results to the prior year will not be… well… comparable.

We talked about Microsoft’s recent entry into the security software market here. While we noted that Symantec and McAfee appeared concerned, we also questioned whether consumers would pay Microsoft to defend against viruses and worms exploiting Microsoft’s Windows operating system. It appears to create a moral hazzard for Microsoft - do they improve Windows or let it stay buggy so they can sell more security software?

Recently it became clear that Symantec and McAfee weren’t the only ones concerned.  Some channel partners and competitors have vocally alleged that Microsoft is pricing its new OneCare suite at predatory levels. Techdirt weighs in here.

For some time there’s been concern about how Microsoft’s push into security software might square with its reputation (and conviction) as a monopolist…. There’s no doubt that Microsoft does want to take shots at its competitors — that’s what all businesses do. What’s funny though is that the argument boils down to the fact that OneCare is too good of a deal, that its licensing terms are too flexible, and that a software package of its caliber just shouldn’t be so affordable. All this sounds pretty good for consumers, whom the law should ultimately be designed to protect. If security software is such a commodity that price is the only concern for customers, then the price should be dropping. In addition to the direct concerns about pricing, the company argues that Microsoft will establish a monopoly in the space, and that investment in new research and startups will dry up. One reason this isn’t likely is that security software doesn’t lend itself to a natural monopoly the way an OS does (not to mention the fact that the vaunted Windows monopoly itself is seen as weakening).

Besides, wasn’t the antitrust argument always that they were trying to kill competition so they could turn around and raise prices? How much did you pay for your last Internet Explorer download? Then, as soon as IE quit being adequate for many users Firefox was developed.

No, we say to hell with the antitrust argument. The moral hazard is the more compelling case here.

We talked about Microsoft’s recent entry into the security software market here. While we noted that Symantec and McAfee appeared concerned, we also questioned whether consumers would pay Microsoft to defend against viruses and worms exploiting Microsoft’s Windows operating system. It appears to create a moral hazzard for Microsoft - do they improve Windows or let it stay buggy so they can sell more security software?

For now, at least, its partners and competitors in the security space are concerned that Microsoft is pricing too aggressively and aiming for a large chunk of market share at their expense.

BetaNews | Microsoft Security Pricing Irks Partners

When Microsoft first hinted that it would enter the security software market three years ago, the company’s partners began to worry behind closed doors about the implications. With Microsoft’s security push now in full swing, the doors have opened and once bedfellows have turned adversaries.

More »

Security researchers at eEye Digital Security Inc. have discovered a serious flaw in Symantec Corp.’s enterprise antivirus software that could be used by hackers to create a self-replicating “worm” attack against Symantec users.
Source: Serious flaw found in Symantec antivirus | InfoWorld | News | 2006-05-25 | By Robert McMillan, IDG News Service

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